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Marshall Brain is planning ahead for an age when robots do all the work and human beings become unemployable. When Mr. Brain and other pundits make predictions of this ilk, they forget that no robot, however advanced, is a match for the power of the Federal Reserve Bank.
Suppose that someone invents a robotic fast-food worker that can replace a worker at McDonald’s. If I own a McDonald’s franchise, I can choose to buy (or lease) the robot, or I can continue to hire human beings for the same job. If the robot is so cheap that no human would work for a competitive price, then all of my employees will be laid off. If workers in a wide range of industries are competing with similar robots, then we will see massive unemployment. Many workers who remain employed will see their wages drop, so that they can remain cheaper than the robots.
But this is where the Federal Reserve exercises its awesome power, the power to print money. What happens if more money is circulated through the economy? From a worker’s point of view, the inflationary effect of the increased money supply counteracts the deflationary effect of the robots. From a business owner’s point of view, inflation eats away the value of capital investments—including robots. Under those circumstances, someone opening a new McDonald’s, or looking to replace a broken fast-food robot, will be better off hiring a human being at inflated wages than hoping that a robot’s output will make up for the purchase price plus inflation. There’s no way the robot-makers can invent more productive robots faster than the Fed can crank out money.
If for some reason the Fed doesn’t exercise its power, we’ll have Depression-scale deflation, few people will be able to afford the products that the robots crank out, and once again, the robot owners will need to write off most of their investments.
As human workers look to specialize in whatever kind of work robots can’t do cheaply enough, a lot of people may end up taking massive pay cuts in new careers, or regretting the time they spent learning a skill that’s been automated away. A humane government, I hope, will do something to reduce the pain of these economic shifts. But until the Terminator takes control of the money supply, there will always be a market for human labor.